The Balanced Spreadsheet-Financial News, Budget Advice, Debt help, Financial Tips, and other advice

August 19, 2009

401(K) Contribution Increases

Filed under: News Review, Personal Finance — Tags: , , , — thebalancedspreadsheet @ 1:26 pm

I found a refreshing article on CNNmoney about the increase in 401(K) Contributions in the 2nd Quarter of 2009.  The article is a week old which I know makes it ancient history, but I want to highlight a few points.

“For the first time in a year, more workers increased the amount of money they put into their 401(K) accounts during the second quarter than decreased their contributions, according to a report issued Wednesday by a retirement fund manager.”

There can be many reasons for the decreased contributions during the past year, mostly fear by investors of putting their money into the market when it is nose-diving, paying down debt, or fear of job loss.  However, I think this is a great time to be putting more money into a 401(K) right now.  The markets are trading around 6 year lows, meaning that you might never be able to buy funds at these lows prices again.  You can kind of say the market is on sale right now so buying low means buying more shares.  Also in the short term, the markets have increased sharply.  Since March 9th the Dow Jones, Nasdaq, and S&P 500 are up 40.8%, 54.1%, and 46.3% respectively!

“Fidelity said the average 401(k) account balance rose 13.5% in the second quarter to $53,900. The increase was primarily driven by the rally on Wall Street, but higher worker and employer contributions also contributed to the rise, the company said.”

After about a year of double digit losses this was refreshing to see.  It was great each month when I was doing our net worth to actually see our 401(K) in the black for the month!  Personally, when you combine the increase in Wall Street and the contributions to my account, my 401(K) experienced about a 33% increase in the second quarter.

“Workers who maintained a long-term point of view are being rewarded with a nice recovery in their account balances,” said Scott David, president Fidelity Investments workplace investing division.”

I think this is a great quote.   By definition investing is having a long-term point of view.  Although my returns made my 401(K) look like a 201(K) the past year and a half, I know I have at least 30 years until I will need to use my money.  This perspective allows one to be able to be calm through this economic turmoil.

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